Hidayatullah, J.— This is an appeal by the workmen of Messrs India Explosives Ltd., Gomia, District Hazaribagh (Bihar) against their employers, which arises out of an award of the Industrial Tribunal, Patna dated July 18, 1961 in Reference No. 31 of 1960. The Government of Bihar made the reference for the decision of the question whether the workmen were entitled to any bonus and, if so, what should be the quantum of bonus. The claim of the workmen was in respect of two years but we are now concerned only with the bonus year ending on September 30, 1960. By the award impugned here the Tribunal held that the claim was not justified because after the deductions according to the Full Bench Formula were made from the gross profits there was no available surplus. In this appeal by special leave the workmen question the correctness of the above conclusion.
2. After hearing arguments on both sides we are satisfied that the appeal must fail. Although there were some errors in the calculation of the available surplus by the Tribunal the resulting position does not alter even after those mistakes are rectified. These errors were in not adding back two sums on account of travelling expenses (Rs 1,53,310) and amounts set apart for gratuity and leave travelling (Rs 91,605). As the Company has conceded these two items we shall deal with this case very shortly because the controversy now lies within an extremely narrow compass.
3. Both sides agree that the net profits were Rs 43,76,877 and also agree to the following additions and deductions in accordance with the Full Bench Formula:
4. Upto this point there is no difference between the parties. The company next seeks to deduct a further sum of Rs 4,50,000 which represents income tax at 20% on dividend paid to shareholders. The workmen resist this deduction. Arguments were advanced in support of the rival claims but there is no need to go into them. Even if this deduction is disallowed the claim of the workmen for bonus is not in any way bettered. This is easily established. We have reached the sum of Rs 19,92,764 which is an agreed figure. From it must be deducted under the formula a sum of Rs 18,00,000 representing 6% return on the paid up capital. This leaves a sum of Rs 1,92,764. From this amount two more items are yet to be deducted. They are (a) return on reserves employed as capital in business, and (b) rehabilitation charges. These, taken with the ex gratia bonus, equal to one month's basic wage already paid which is a sum of Rs 1,10,000 does not leave any amount as surplus from which to pay any further bonus. It was contended that no rehabilitation charges should be allowed as the Company was in its first year of production. This is not correct. The Company was formed in 1955 and started production in 1958. In this bonus year rehabilitation will have to be calculated and deducted according to the Full Bench Formula.
5. The workmen relied upon the report of the Directors where it is stated that no income tax was payable on the year's results and a total of Rs 62,39,000 made up of income tax and development rebate was being carried forward. The workmen submitted that no deduction under the head “Income Tax” should be made in arriving at the available surplus. In the application of the formula the deduction of income tax is notional. The gross profits are arrived at by adding back certain items to the net profits and then the gross profits are reduced by making certain notional deductions. One such deduction is under the head “Income Tax”. This deduction is not made on the actual amount payable but what would be notionally payable on the profits determined under the formula. If we accept the argument on behalf of the workmen we would not be applying the formula.
6. In this view of the matter it is obvious that the suggested addition of Rs 62,39,000 cannot be considered. As there is a deficit and no available surplus, the Tribunal was right in rejecting the demand for bonus for the bonus year ending September 30, 1960. The appeal is dismissed but we make no order about costs.